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Lloyd's profits reach 2.96 bln USD

Xinhua, March 24, 2016 Adjust font size:

2015 was a tough trading year for the global insurance platform Lloyd's, but profits still reached 2.1 billion pounds (2.96 billion U.S. dollars), it was revealed Wednesday.

This is a 30 percent fall on profits for 2014, but comes against a tough trading environment, principally low interest rates globally which continue to pressure the investment income that the insurance markets need to function.

John Nelson, the chairman of Lloyd's, said this was a "significant drop."

Nelson told Xinhua: "The main reason for that has been a significant drop in investment income. So, the investment income has been down from just over a billion pounds in 2014 to just over 400 million pounds last year. And the reason for that is clear. It is to do with very low interest rates."

He added: "We invest capital in very liquid form -- cash, near cash, short term dated bonds, and that has meant that investment returns in those conditions have been very low. At the same time we have pressure, because of low interest rates, on the insurance market."

However, Nelson said that there had been a "good return" on capital of 9.1 percent (down from 14.1 percent in 2014), and that in turn had attracted capital into Lloyd's and into the global insurance market, which had depressed premium rates.

"That has been a pattern we have been seeing for quite a few years now, but the pressure is intensifying," said Nelson.

Lloyd's underwrites complex risks through its 97 syndicates of insurers, and has been in business as a marketplace for insurance for 328 years.

Prospects for 2016 and beyond remained challenging, said Nelson. "We have to assume that the investment conditions remain tough. There is no sign of rising interest rates. And equally I think the pressure on premiums will continue. So, we are planning on the basis of a tough outlook.

Conditions will change, but there is no immediate prospect of that.

"People will need to look at the returns they are providing and that will have an impact on hardening premium rates at some point. We don't see that in the short term," said Nelson.

Lloyd's has been developing its presence in emerging markets, including China, where business increased by 100 percent last year, albeit from a low base.

Lloyd's has been present in Shanghai since 2000, where it opened its platform under license in 2007. Two years ago, it opened a branch of that platform in Beijing. (1 pound = 1.41 U.S. dollars) Endit